Carlsberg A/S (CARLA), the world’s fourth- biggest brewer, will offer to buy as much as 2.9 billion yuan ($466 million) of shares in Chongqing Brewery Co. (600132) as it seeks to tighten its grip on the Chinese beermaker.
Carlsberg, which already owns a 29.7 percent stake in the Chongqing municipality-based brewer, will offer 20 yuan a share for a further 30 percent stake in the maker of Shancheng beer, it said yesterday in a statement. The deal will add to earnings per share in the first year after completion.
“Strategically, we believe the deal makes a lot of sense,” Trevor Stirling, an an analyst at Sanford C. Bernstein in London, wrote in a note to clients dated yesterday. “Asia is key to Carlsberg’s long-term growth story; in particular, China is key to Carlsberg’s footprint in Asia, especially western China, including Chongqing.”
Carlsberg, which gets about 14 percent of its sales from Asia, according to data compiled by Bloomberg, is seeking to expand its operations outside the slow-growth markets of northern and western Europe. The brewer said on Feb. 1 that it’s starting a new joint venture in Myanmar, after announcing a tie- up with Thailand’s Singha Corp. on Sept. 28. Carlsberg is the biggest brewer in Russia.
The Chongqing price is 15.7 times estimated earnings before interest, tax, amortization and depreciation, based on expected profits the first year after completion, Carlsberg said. The deal will be financed through existing facilities and may take as much as 12 months to complete.
Chongqing Beer Group Co., which owns 20 percent of Chongqing Brewery, has committed to tender all its shares at the proposed price. If the bid is oversubscribed, Carlsberg will buy any remaining shares held by Chongqing Beer Group.
“We believe that through closer cooperation with Carlsberg, the performance of this large-scale beer business will be significantly enhanced,” Joergen Buhl Rasmussen, Copenhagen-based Carlsberg’s chief executive officer, said in the statement. “Our Asian business is very important for our long-term growth strategy.”
Carlsberg’s shares rose 1.1 percent to close at 594.50 kroner in Copenhagen yesterday, giving it a market value of 91.7 billion kroner ($16 billion). Chongqing’s shares, halted since Feb. 25 pending this announcement, will resume trading today, according to a statement issued via the Shanghai stock exchange yesterday.
Chongqing is strong in western China, including Chongqing municipality, and on the east coast, Ian Shackleton, an analyst at Nomura in London, wrote in a note dated yesterday.
“Although Carlsberg will need further deals to become truly national like market leader China Snow, majority control of Chongqing is a useful building block towards this goal,” Shackleton said.
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